United States v. Nordic Village, Inc.

Background

A Chapter 11 bankruptcy trustee (the person appointed to manage the company’s estate) sued to get back $20,000 that a company officer had taken from the business account and paid to the Internal Revenue Service to cover his personal taxes after the bankruptcy filing. Lower courts allowed the trustee to recover the payment from the IRS, and the Sixth Circuit affirmed that judgment. The question presented was whether §106(c) of the Bankruptcy Code clearly lets a trustee sue the United States for money.

Reasoning

The Court said waivers of the Government’s sovereign immunity must be ‘‘unequivocally expressed’’ in text. It found that subsections (a) and (b) of §106 clearly allow monetary claims in limited situations, but subsection (c) is ambiguous. The opinion offered two plausible readings of §106(c) that do not authorize money claims: one limits relief to declarations or injunctions, and the other treats subsections (a) and (b) as the exclusive paths for monetary recovery. Because the statute is not unambiguous on money judgments against the United States, the Court would not infer a waiver from §106(c) or from related jurisdictional provisions or trust-law arguments.

Real world impact

As a result, bankruptcy trustees cannot rely on §106(c) alone to get money from the federal government to repay the estate. Trustees trying to avoid or recover postpetition transfers paid to federal agencies will be blocked unless Congress provides a clearer textual waiver. The decision leaves intact lower-court judgments only insofar as they do not require monetary recovery from the United States.

Dissents or concurrances

Justice Stevens (joined by Justice Blackmun) dissented, arguing the text and legislative history plainly waive immunity and that the outcome is unfair to creditors and shareholders.